Electronic Banking

What is Electronic-Banking
• E-banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, Interactive communication channels.
• E-banking includes systems that enable customers of financial institutions, individuals or businesses, to access accounts, transact business or obtain information on financial products and services through a public or private network, including the Internet
• In addition, e-banking is made up of a broad category of systems and devices, including one of its first and perhaps most common forms that include credit and debit cards
• E-banking provides clients with the capability to do business with the bank, even after working hours, and the clients can do it in places they deem comfortable to use the computer and the internet

Elements of Electronic-Banking

Electronic Data Interchange (EDI):

 Electronic Data Interchange (EDI) refers to the structured transmission of data between organizations by electronic means
 It is used to transfer electronic documents from one computer system to another, i.e. from one trading partner to another trading partner

Automated Teller Machine (ATM)

 ATM is a device that allows customers who have an ATM Card to perform routine banking transactions without interacting with the human teller
 The ATM cardholder can do most of the banking transactions like withdrawals, deposits of cash and cheque, balance enquiry, etc.
 The origin of ATMs can be traced back to June 1967 when Barclays' Bank installed the first cash dispenser in the UK

POS (Point of Sales)

 A point-of-sale (PoS) terminal is an electronic device that is used for verifying and processing card transactions
 Point-of-Sale Transfers let one pay for purchases with a debit card
 The process is similar to using a credit card, with some important exceptions
 The process is fast and easy, a debit card purchase transfers money - fairly quickly - from one’s bank account to the store's account

Plastic Card Currency

 Plastic cards, also known as plastic currency, involving electronic devices in their functioning is gaining popular as a convenient mode of payment
 By using these plastic cards, financial exchanges take place on line between buyers and sellers
 There are different types of cards which include Credit Cards, Debit Cards, ATM Cards and Smart Cards

Credit Card

 Credit Card can be called as an equivalent of a loan sanctioned by the bank to its customers
 Credit card facilitates and makes it possible to "Use First and Pay Later"
 Before issuing the card, the bank likes to know and be sure of the identification, age, level and source of income and repayment capacity
 This card facilitates the cardholder to purchase goods and services from the merchant establishments and shops through the collaborating credit card companies like VISA, MasterCard, Maestro, and Cirrus.
 Interest is charged by the bank, on a monthly basis, for the credit provided through the card. Service charges are collected from the cardholder/merchant for the transaction and processing.

Debit Card

 A Debit Card allows online electronic payment from savings or current accounts of the cardholder for purchases or cash withdrawals
 This card is a deposit access product where cardholder uses his own money in his bank account through the debit card on the principle of "Pay First and Use Later".
 Debit card can be used to make purchase at retail shops and merchant establishments in the same way as the credit card is used.
 But in order to use the debit card, the cardholder must have sufficient balance in his/her account. Debit card contains the symbol or hologram of the collaborating company such as VISA, MasterCard, Maestro and Cirrus, etc.

E-Payments

Payment is generally understood as a transfer of fund from one person (payee). In E-Payments, funds are transferred through electronic mode. These are:

S.W.I.F.T

 The society for Worldwide Inter-Bank Financial Telecommunication (S.W.I.F.T.) provides reliable, secure and expeditious telecommunications facilities for exchange of financial messages across the world
 The banks are mostly the member of this International Financial Messages Communication Network. The banks can carry out foreign exchange business, safely, using this network.

Electronic Funds Transfer (EFT):

 EFT system permits transfer of funds from an account at any branch of a member bank in any city to any other account at any branch of any member bank in any other city
 This system utilizes the service branches of the member banks. It facilitates the transfer of funds from one place to another place within the country quickly and safely.

Tools of EFT

 Internet Banking
 Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail banks. The common features fall broadly into several categories:
Forms of Internet Banking

Transactional

 Financial transactions, electronic bill presentment and payment
 Funds transfer between a customer's own checking and savings accounts, or to another customer's account
 Investment purchase or sale
 Loan applications and transactions, such as repayments

Non-transactional

 Viewing online statements, check links, chat
Remittance Services:
 Remittance houses worldwide provide remittance transfer services through various forms of E-Banking starting from basic PC based software to web based instant payment solutions
 Today’s fast changing electronic banking channels have massively improved the flow of remittance across the world:

• Western Union Money Transfer
• MoneyGram
• XPress Money


Mobile Based Banking:

 Mobile banking (also known as M-Banking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments, etc., via a mobile device such as a mobile phone

 Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device

Available Mobile Based Banking:
 Balance checking in the account
 Recent transactions
 Alerts on account activity
 Access to loan statements
 Access to card statements
 Due date of payment alerts

Upcoming Mobile Based Banking:
 Fund transfers
 Mobile recharging
 Withdrawal at banking agent
 Deposit at banking agent

Future of Mobile Based Banking:
 With introduction of full fledged Mobile based banking customers will be able to deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa
 Bangladesh Bank has already allowed a few banks and mobile operators to initiate mobile based fund transfer services in the country
 Mobile operators collaborating with banking industry are eying a major change in the remittance payment procedure in the country in the coming years

Automated Clearing House
 Automated Clearing House provides paperless electronic image based cheque clearing solution, avoiding the need to make physical presentation of the cheques to drawee banks thereby greatly improving the clearing and settlement process
 Bangladesh Bank is going to introduce Bangladesh Automated Clearing House (BACH) from March 2010
 In the new system, a customer will deposit his cheque to the collecting bank, a digital image of the cheque will be generated and electronic information will be captured for the clearing process
 The cheque image will be presented to the drawee bank, electronically, via the Automated Clearing House located at Bangladesh Bank.
 Paper cheques will be retained by the collecting bank
 The interbank processing of Cheque Image and Truncation System (CITS) will be secure and reliable with no impact on the customers.

Benefits of E-Banking

From Customers’ Point of View

 The customer can transact in their account at any time and anywhere throughout the country or outside the country.
 There is no time and place restriction
 The customers need not visit the branch for transaction and no need to wait in the big queue, thus saving time.
 The customer can avail 24*7 access to the banking services from any where.
 With the help of e-banking, the easy access to the banks is another advantage to the customers.
 Customer can have better awareness of products & services
 Customer can have up-to-date information of his or her accounts

From Bank’s Point of View

 In this competitive world, E-banking helps banks attract more customers and face competition from other banks
 Banks can enhance customer satisfaction through rendering sophisticated services
 Banks can avoid fraudulent activities and reduce overall risk by having proper MIS and providing secured e-banking services
 Banks can save time and can increase the number of transactions and business with the help of E-banking
 Banks can improve service delivery and quality with introduction of E-banking
 Cross sell the complete suite of banking products and services
 Banks can save costs by sharing the electronic network with peer banks